US President Donald Trump has signed an executive order that clears the way for sweeping changes to the country's health insurance system, including sales of cheaper policies with fewer benefits and protections for consumers than those mandated under the Affordable Care Act.

The US President's plan, an 1,100-word directive to federal agencies, laid the groundwork for an expanding array of health insurance products, mainly less comprehensive plans offered through associations of small employers and greater use of short-term medical coverage, New York Times reported on Thursday.

With these actions we are moving toward lower costs and more options in the health care market, and taking crucial steps toward saving the American people from the nightmare of Obamacare," Trump said at a White House ceremony.

"This is going to be something that millions and millions of people will be signing up for," he predicted.

It was the first time since efforts to repeal the landmark health law collapsed in Congress that Trump has set forth his vision of how to remake the nation's health care system using the powers of the executive branch. It immediately touched off a furious debate over whether the move would fatally destabilize the Affordable Care Act, marketplaces or add welcome options to consumers complaining of high premiums and not enough choice.

In Congress, the move seemed to intensify the polarisation over health care. The Senate majority leader, Mitch McConnell of Kentucky, said the President was offering "more affordable health insurance options" desperately needed by the consumers.

But the Senate Democratic leader, Chuck Schumer of New York, said Trump was "using a wrecking ball to single-handedly rip apart our health care system".

Most of the changes will not occur until the federal agencies write and adopt regulations implementing them. The process, which includes a period for public comments, could take months. That means the order will probably not affect insurance coverage next year but could lead to major changes in 2019.

But many patients, doctors, hospital executives and state insurance regulators were not so happy. They said the changes envisioned by Trump could raise costs for sick people, increase sales of bare-bones insurance and add uncertainty to wobbly health insurance markets.

While many health insurers remained silent about the executive order, some voiced concern that it could destabilize the market.